How Corporate Takeover Influence Corporate Environment - Research Paper Example

How Corporate Takeover Influence Corporate Environment Corporate Takeovers and Mergers and Acquisitions are an integral part of the economic culture in modern day business environment. Corporate takeovers are considered to be the biggest investment that an organization can undertake and hence, it provides a gateway to various implications in terms of management decisions, strategies, contractual nuances, procedures, financial liabilities and so on (King Slotegraaf, and Kesner, 2008). Among the numerous aspects that get influenced because of corporate takeover, an aspect that is not given considerable importance is how the corporate environment gets affected because of the takeover. A corporate environment essential reflects the personality of an organization and it stands for aspects like the behaviors, beliefs and value system that is essential to any organization. However, when a corporate takeover happens, the corporate environment gets affected drastically. In the work of Mergers and Acquisitions and corporate takeovers, culture and corporate environment are considered to be a very small aspect during the evaluation process. However, the corporate environment has a huge role to play in the way in which the organization carries out the everyday business. Many scholars also speculate that lack of focus on the changes in corporate environment during a corporate takeover can result even in the failure of the exercise (Straub, 2007). This study aims to analyze how corporate takeover influences the corporate environment and explores the various aspects that get influenced with special focus on Mars and Wrigley Merger. Mars and Wrigley Merger Confectionary major Mars declared a corporate takeover of Wrigley for $23 Billion in 2008. According to this agreement, Wrigley would become a subsidiary of Mars. The main aim of this exercise was to ensure that both the organizations would be able to combine their core strength to create an organization that would spearhead innovation in confectionary industry. The aim was also to bring about diversity in the confectionary business so that they would be able to handle chocolate, non-chocolate confectionary as well as gum categories. According to Executive Chairman Bill Wrigley, the merger would mean that there would be total of 64,000 associates globally and hence, the new merger would help in exploring both geographical locations as well as market segments that were not within the reach in past (Rano, 2008). This deal is considered to be a landmark deal in the confectionary industry because it signaled the merger of two very powerful organizations. While it was speculated that there would be many challenges associated with this merger, it also meant that a smooth merger of two organizational cultures. When looking at culture, both the organizations would have certain elements that are common and some elements that are different and it would be interesting to understand how the two organizations reach on a mutually agreeable corporate environment. Key factors related to Corporate Environment and Organizational Culture. The organizational culture is a reflection of the corporate environment and can commonly be defined as attitudes, values, beliefs, norms and customs which distinguish every organization (Carnall, 2007). This culture gets affected by numerous factors, such as Organizational history, specific characteristics such as size, complexity, rules, norms, the economic and technological environment and so on (Doina et al, 2008). When two organizations merge or if there is an event of corporate takeover, there are high chances that there would be a cultural clash because each organization nurtures its unique culture. A process of merger invariably results in an organizational transition and hence, leads to a culture clash. In all likelihood, the two concerned organizations have very different management and leadership styles, even though they may belong to the same industry. In the event of a merger, there could be issues related to both the management as well as staff. Conflicting leadership styles can create creases among the management team as there would be lack of cohesion. In addition, drastic changes in leadership style can also cause unhappiness among the employees as they may feel insecure and express lack of trust. For the success of any corporate takeover process, it is necessary to work as one cohesive unit and hence, such conflicts should be anticipated so that important steps can be taken to avoid it in the future. While it is true that the culture as well as corporate environment would undergo changes, the goal should be to ensure that these changes happen in a planned and organized manner. During the process of a corporate takeover, there could be key clashes related to ‘cultural dominance’ (Hall, 1995). For example, in the case where a company is taken over as a subsidiary of another organization, then the company that acquires the other company tends to impose its culture over the organization that has been acquired. This creates an unhealthy situation because dominance may create a hostile environment and one fraction may feel dominated. The deal between Wrigley and Mars also could have landed in this situation because Wrigley was to function as a subsidiary of Mars. This would mean a change of direction for Wrigley, which has a huge legacy of being a century old family business of the Wrigleys. Thus, it was very important to ensure that the acquired organization did not have to undergo any cultural dominance from Mars because the larger goal was to expand the business and incorporate elements from both the organizations involved in the merger process. Effect on Corporate Identity An essential part of the corporate environment is corporate identity. When two organizations agree upon merger and acquisition or a corporate takeover, corporate identity of both the organizations involved undergo a change (Anand and Nicholson, 2004). Thus, there may be some amount of impact that may happen due to either retaining the name of one particular company or assuming an acquired name. The internal impact may be slightly less, but externally, this may prove to be a big change. In cases where the name of the organization is totally changed to the name of the organization acquired, then there is a high chance that the organization that has to undergo the name change may feel dominated. The change in identity may lead to conflicts of superiority and inferiority; hence, it has to be carried out in a manner that would lead to very less conflicts. In addition, the various implications of rebranding also need to be considered because rebranding is associated with several risks that may have a direct impact on the bottom line of the organization. Rebranding can result in changed perceptions in the industry about both the organizations involved. In addition, there may be speculations about whether the two merged organization is able to sustain its market position because of the drastic change in their operations. Another important aspect that comes into the forefront is that the organizations move in a new strategic direction post the corporate takeover (Barney & Hesterley, 2008). Post any corporate takeover, organizations revamp their short-term as well as long-term objectives. This decision has a huge impact on corporate environment. For example, many newly merged organizations have aggressive goals because of the need to fight of any market speculations. For aggressive growth, higher targets may be set and new approaches may be taken to achieve those. Therefore, the strategic direction may change in a big manner during a corporate merger. With Mars and Wrigley, the rebranding exercise did not have a huge impact when external market is considered. This is because Wrigley continues to retain its brand name and operates as an independent subsidiary of the parent company Mars (Neely, Leinwand and Misra). Wrigley has a very powerful brand name and is often considered to be synonymous with chewing gum. Hence, the decision not to opt for rebranding was essential, especially because the product belonged to the fast moving consumer goods category. Therefore, both Mars and Wrigley retained their brand names, thereby minimizing any impact that would happen because of change in branding. Effects on Organizational Values and Communication Organizational Value is one aspect that gets affected in a big manner when during a corporate takeover. Each organization has its own organizational value. Hill and Jones have defined organizational value as a set of beliefs and ideas about the kind of goals that employees of an organization should pursue as well as guidelines about the behavior that these employees should indulge in when they strive to achieve these goals (Hill and Jones, 2001). Organizational values go a long way in determining the corporate environment. As these values define the core ethics of the way in which an organization may operate, it may create conflicts because of the change in the value system. At times, these core values and philosophies are the reason why many employees join the organization and remain loyal to it. Hence, it is extremely critical to be cautious to bring about sudden changes in organizational values. The approach to communication also undergoes a change post and acquisition or merger. Two organizations have different ways in which information is communicated across. Some organizations may have a much disciplined approach to information dissemination where as some others may have a very informal approach. Again, sudden changes to communication system may have an impact on the employee morale as well as employee attitude, thus resulting in a change in the entire corporate environment. However, it is also important to ensure that there is a streamlined process of communication in the organization. Hence, this is a topic that needs to be handled with caution and the best approach to ensure streamlined communication without greatly affecting the employee attitude should be arrived upon. Both Mars and Wrigley have their own set of core values. While Mars’ core values center around the Five Principals of Mars (Quality, Responsibility, Mutuality, Efficiency and Freedom) (mars.com, n.d), Wrigley has a core set of values known as the Wrigley Ways (the core principals revolve around equality, trust, taking measured risk, having high impact and so on) (Wrigley.com, n.d). Even in terms of communication, both these organizations had very different approaches. For example, in Wrigley, the attitude towards communication is more disciplined and thus happens through a series of networks, in a top to down approach. Information flows in a cascading manner. However, in Mars, the information transfer happens through networks and in a parallel manner. It does not mean that there is no information flow in a top to bottom approach, it does happen when necessary. The corporate culture is more attuned in such a manner that the employees prefer a parallel way of communication through networks. Effect on People, Benefits and Technology The strength of an organization lies in its employee base. After a merger, it is natural that the employees would have to bring about some changes in their working pattern, attitude as well as approach towards the organization. If not properly handled, this may have an impact on employee morale and trust levels. The most important aspect is to ensure that employees do not feel insecure in the wake of the new developments (Galphin and Hendron, 2000). There would be additional issues that need attention such as consolidation and reduction of forces. Some roles may become redundant and would need consolidation, which may create fear among the employees. In addition, there may be emotional reactions and change in loyalties. It is also necessary to be open and clear about any changes in staffing so that employees are prepared for what to expect. With regards to employee approach, Wrigley has an orientation towards emotional quotient where as Mars has a leaning towards intellectual quotient. While the leadership of both the organization is open, fair and strives to create an environment of trust, the approaches are different and hence, need to be coordinated in a better manner. Different organizations also have different approaches to the way in which they offer benefits to the employees. The ways in which reward programs are structured and carried out are also different. Hence, there may be major changes in the way compensations and benefits are structured and it may result in some levels of confusion as well as unhappiness. However, it is also critical to make sure that there is a central and unified method of providing compensation to ensure that there is no unfairness. Similarly, two organizations may have difference in the way in which technological set-ups are done. There may be software and hardware incompatibilities and the differences need to be creased out to ensure compatibility. This may also mean additional investment in training so that there is a centralized system. It is not necessary that this change has to happen in a sudden manner. The most effective method is to bring about change in a slow manner and ensure that training happens at the appropriate time. How to manage change in corporate environment during corporate takeover Change management becomes critical during a merger because it provides a direction and strategic vision to handle the huge changes that would be coming along. Kotter’s 8 steps to handling change is a popular strategy that is used by many corporate in the event of a takeover (Kotter, 1996). The 8 steps to change management are- 1. Establish a step of urgency - Here, the managements can sit together to analyze the current culture, its limitations and advantages and discuss the need for culture change. 2. Form a powerful guiding coalition - Groups of senior management who would champion the change can be formed at this stage. In addition, both internal and external support can be gathered. 3. Creating a vision - It is important to develop a new vision and mission statement that talks about the two cultures and also strategies should be formed to execute this vision. 4. Communicating the vision - Once the vision is formed, it is important to communicate this change to both the consumer base as well as to the employees. This stage can be put to use to gather feedback also. 5. Empower others to act on the vision - It is necessary to create the right environment to empower staff to act on the changes. They should be given sufficient time and the opportunity to identify any constraints. 6. Plan for creating short term wins - Short term goals such as, opportunity for the staff in the two organizations to interact, inter-company position changes, streamlining inconsistencies and so on. 7. Consolidating gains and producing more changes - During this stage, the small wins can be used to pave the way for larger goals. 8. Institutionalize new approaches – This stage can be used for critical aspects like documenting the changes, organizational changes and so on. Conclusion It is evident that there would be very evident changes to the corporate environment during a corporate takeover and hence, it is necessary for the organizations to be prepared in advance for these changes. There are numerous aspects that shape the corporate environment; hence both long term as well as short term planning becomes critical. Even though the main goal of a corporate takeover would be to enhance the revenue, an approach that does not take corporate environment into consideration may result in failure in adaptation. References Anand, N & Nicholson, N (2004). Change: How to adapt and transform the business. 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